Credit Report Contents

Tuesday, September 9, 2008

This is our second part in our “introduction to credit” series:

Credit report is a document which gives the evidence of your credit worthiness. It contains such information that reveals your habit of meeting debt obligation. Such report is essential both for the lender and borrower. If you are associated with the credit market then you must have sound knowledge on the subject so that yu can take right decision. As a lender, the credit report gives you enoguh indication whether to give an applicant a loan or not. As a borrower it enhances you confidence to get fresh loan from a lender.It is true for both indivudual and company or organization.

Credit report gives a deatil crdit histroy of a person or company. It contains different types of information from which a lender   understands the credit worthness of the prospective borrower. The credit report contains usually four types of information regarding the borrower. Such information include identifying information, credit information, public record information and information of recent enqueries.Now we shall discuss what are these information and how such information guide a lender to decide whether to offer loan or not.

The identifying information of the credit report gives detail identification of the borower. The informations include the name, full address, social security numer, birth date and employment. From this information the lender can understand the genuineness of the borrower. The credit informatin mentioned in the credit record tells about the bank accounts, credit card issuing organization, credit limit, the date of oppening the accont and  many other information relevant to the lender. The public eccord information tells about the court record especially about bankruptcy. In many occasions, reporting agencies also mention court record on non-monetary judgements. The infomatin of recent enquiries exactly tells how many persons have sought your credit report during the last two years.

The credit record becomes the base of the credi score. The credit score is nothing but the numerical expression of your credit worthiness. It is based on a deep analysis of the credit records of a borrower. This credit score is very much esential for the lender who is supposed to give you loan. The lender may be a bank or a creditcard company, which want to evaluatethe credit worthiness of the borrower. The lenders take this precaution to avoid bad debt. It ha been seen that a person with bad credit histroy often cannot met his credi obligation. The lenders decide the qualifying score for a borrower. In this regard there is no uniformity; differet banks and crdit card companies follow different standard in this regard.

The credit record or score is recently getting much importance. Its utility is not only limited to the banks  and other financial institutions, curently it is used by many service providing cmpanies like insurnce company, telephone company, emplyoyers and diffrerent govement departments. In recent future, the credit score will be used by many other sectors. At present, this credit score has been a subject of interest for many academicians and researchers.

The credit scoring is generally controlled and regulated by the finacial svice authority and the customer has no knowledge regarding it. That means a borrower you cannot know his safe score to get a particular loan from a lender. Actually there is no safe score; it varies frombank to bank. Simply, the credit score is a complex thing to be deciphered by the borrower in advance. On the othr hand, the lnders also never disclose the method they use to select a prospective borrowr. No way, they disclose the munimum scrore required by them. From the above discussion it is clear that the borrwoer cannot take any precaution against low credit scoring. However, if the application of a borrower is declined by a lender, he is obliged to mention the reason.

The credit score is determined by different fiancial agencies in differetnt countries. In USA, it is determined by credit bureaus. There are three major credit bureaus in USA whch undertake this responsibility. The three major crdit bureaus which determine the credit score are Experian, TransUnion and Equifax. The calculation of credit score is not uniform, different bureaus may follow different methods for this. But one of the most recognized methods is FICO score. This is a special method of calculating credit score designed by Fair Isaac Corporation. This FICO score is recognised by many lenders through out the USA.  The FICO score is worked out on a risk-based system which tells about the possibility of a borrower to default the debt obligation if loan is given to him. Apart this FICO score, each of the crdit bureaus has their own score. The Equifax is known for its ScorePower, while Experian and TransUnion sell PLUS score and Credit score respectively.
Since there are some USA readers of this Canadian blog, I thought I’d cover them a little. In USA, debt is a major problem. Many people incur debt but fail to meet their obligation. In such a situation, the citizens of USA can avail one free credit report from the above mentioned three credit bureaus in every twelve months. You can get the credit report from Annualcreditreport.com. If you want to know your credit report, you can log on this site to get your credit report. Remember that such credit report doesn’t furnish any credit scoring; if you want to know your credit score, you have to pay for it. There is a provision in some states like Colorado, California that a borrower is entitled to get his credit report if he is denied to get a loan.

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